Pai's FCC Makes Access Regs Flip-Flop
There's a new Chairman in town, and he's got a big agenda for the FCC.
Dubbing April "Infrastructure Month" at the Federal Communications Commission (FCC) , Chairman Ajit Pai has packed the agency's schedule with new items for consideration pertaining to how broadband deployments are regulated. Among those items is a draft Report and Order on Business Data Services (BDS), also known as special access. BDS covers service-guaranteed Internet connections sold to support businesses, carrier backhaul and point-of-sales systems like ATMs and credit card machines. It also covers the wholesale connectivity market where telecom companies sell access to their infrastructure to other service providers who can then package and market those connections to additional retail customers.
The new BDS order posits that the business data services market has outgrown the old regulatory regime governing it. According to a fact sheet currently in circulation, the FCC declares that "we at long last recognize the intense competition present in this market and adjust our regulatory structure accordingly." The FCC's proposal calls for an end to tariffs and other "legacy pricing regulations," and specifically notes the impact that new cable entrants have had on business service pricing and availability.
The analysis is almost the exact opposition of conclusions reached by the FCC under Chairman Tom Wheeler in 2016.
Chairman Wheeler also wanted to pass BDS reform, but the rules he proposed were based on an analysis that showed competition in the market hasn't advanced far enough. Those rules called for new regulations that would have worked to set wholesale prices based on the cost of retail services in areas deemed uncompetitive. Importantly, the order also called for applying the new rules without regard to technology, meaning that cable operators would have faced the potential for price regulation in the BDS market for the first time. (See FCC Prepares to Vote on Price Regulation.)
The disconnect between Chairman Pai's findings and Chairman Wheeler's conclusions comes down to how they define market competition. Wheeler's report cites the damning statistic that 73% of special access locations are served by only one incumbent telecom provider, with no other facilities-based supplier present.
Pai's fact sheet, on the other hand, argues that competition can't be determined simply based on whether a competitive provider is present in a specific building. The analysis also has to take into account whether other service providers are present nearby and therefore have an impact on pricing because of the ease with which they can extend their networks a short distance. Pai's analysis also contends that many businesses are happy with best-effort Internet service, and therefore best-effort services -- which sometimes offer higher, though non-guaranteed bandwidth -- have to be considered as part of the competitive landscape.
Unsurprisingly, because of the recent change in FCC leadership, Pai's view of the BDS market now holds sway. And when a new regulatory structure based on that view is voted on by the full Commission (currently two Republicans, one Democrat), it is sure to pass.
The winners under Chairman Pai's proposal include incumbent telecom providers and cable operators, who will now arguably have greater flexibility in setting BDS prices. The losers include non-incumbent providers who in theory now face greater barriers to entry in the BDS market.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading